Medicare Fee-for-Service Modifications and Medicaid Provisions of H.R. 1 as Enacted

Publication Date: January 2004

Publisher: Library of Congress. Congressional Research Service

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Research Area: Health

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Abstract:

On November 22, the House of Representatives voted 220 to 215 to approve the conference report on H.R. 1, the Medicare Prescription Drug, Improvement, and Modernization Act of 2003. The Senate, on November 24, voted 54 to 44 to approve the conference report. Earlier, the conferees of the Medicare prescription drug and modernization legislation announced an agreement on November 16 and the legislative text was released November 20. The legislative language can be downloaded from the House Committee on Ways and Means website at: [http://waysandmeans.house.gov]. The bill was signed into law by the President on December 8, 2003.

As well as establishing a prescription drug benefit for Medicare beneficiaries, the legislation contains provisions that involving significant payment increases, payment reductions, an expansion of covered benefits, new demonstration projects and new beneficiary cost-sharing provisions for the traditional Medicare fee-forservice (FFS) program. The bill includes a measure that would require congressional consideration of legislation if general revenue funding for the entire Medicare program exceeds 45%. Provisions affecting the State Childrens' Health Insurance Program (SCHIP) and Medicaid programs are included in the legislation as well.

Earlier this year, under Congress' FY2004 budget resolution, $400 billion was reserved for Medicare modernization, creation of a prescription drug benefit, and, in the Senate, to promote geographic equity payment. The Congressional Budget Office (CBO) has estimated that the legislation for H.R. 1 would increase direct (or mandatory) spending by $394.3 billion from FY2004 through FY2013. Prescription drug spending is estimated at $409.8 billion over the 10-year period and Medicare Advantage spending at $14.2 billion. Overall, the fee-for-service provisions which change traditional Medicare are estimated to save $21.5 billion over the 10-year period and adjusting the Part B premium to beneficiaries' income is estimated to save $13.3 billion over the period. Some fee-for-service provisions will increase spending over this 10-year period including the provisions affecting hospitals and physician. Other fee-for-service provisions are projected to save money over the period including those affecting durable medical equipment, clinical laboratories and home health agencies. The CBO estimate is available on the CBO website at [ftp://ftp.cbo.gov/48xx/doc4808/11-20-MedicareLetter.pdf].